Special Report: Experts now say Revel may go for pennies on the dollar

By Andrew George,
July 28, 2014 at 2:15 PM

Revel, which cost over $2 billion to build, could go for as low as $30 to $40 million. - (PHOTO BY AARON HOUSTON)

It's still shiny and new, and by all accounts, it should be. Just 2 years old, Revel Casino Hotel cost a hefty $2.4 billion to build. But come next week, the troubled casino resort goes up for auction after declaring bankruptcy for a second time in 15 months.

And here's the sad truth: The oceanfront property is likely worth just pennies on the dollar of its original price tag — even if there are reportedly a half-dozen prospective buyers in the market.

Alan Woinski, president of Paramus-based Gaming USA Corp., said he wouldn't be surprised if the top bid comes in at somewhere around $30 million or $40 million.

That's because Revel sports a number of major design flaws, Woinski said, from poor access to the casino floor from the street and the boardwalk to an overly complicated layout of dining and shopping options. To fix all of that, he says, could cost a prospective buyer as much as $200 million.

“That's all it's worth because of the amount of money you have to put into it,” Woinski said.

According to Michael Busler, a public policy analyst and finance professor at Richard Stockton College in Galloway, property values don't bode well for Revel's potential price tag, either.

As a property designed to produce income, Revel's inability to ever turn a profit has likely knocked its estimated value down to the $200 million to $250 million range, Busler said.

“Based on what it has generated so far, the value of Revel is probably about 10 percent of what it cost to build it,” he said.

Couple that with the renovations Woinski mentioned and it's easy to see why Busler said that by the time Revel hits the auction block, a buyer “can't afford to pay more than $100 million for it.”

“It's hard to imagine something that cost over $2 billion being sold for that low,” Busler said.

So who might make a play at Revel?

There are six potential buyers, Atlantic City Mayor Don Guardian told the Associated Press last week, though he didn't name specific companies.

William Pascrell III, a lobbyist for the Princeton Public Affairs Group, said he is currently representing a prospective bidder, whom he declined to name. He, too, has heard that the property may sell for south of $100 million, which he admits is “crazy.”

“It's the market right now,” Pascrell said.

And for any potential buyer, it's not just the design flaws that present additional costs. Revel will need a rebranding, Pascrell said.

In Woinski's perfect world, the bidding process would begin and end with one marquee name: Steve Wynn, CEO of Wynn Resorts.

“My first thought was the only one who could save this property was Wynn,” Woinski said.

Wynn previously had been rumored to have interest in Revel and reportedly toured the site once during construction. But as Woinski points out, “being at the property doesn't mean anything.”

Wynn Resorts spokesman Michael Weaver told NJBIZ that Revel is currently “not an item of interest” for the company.

Other potential suitors, according to Woinski and Busler, could be Hard Rock International and Caesars Entertainment Corp., both of which have also been rumored at times to have interest in Revel, along with Penn National Gaming, which operates the Freehold Raceway and racetracks and casinos across the country.

Caesars is a particularly intriguing option, say Woinski and Busler, because it already runs four casinos in town. The problem is that it already plans to close the worst-performing of the bunch, Showboat, in late August.

“If you're going to close Showboat because you're going to buy Revel, that makes a lot more sense,” said Woinski.

“Caesars has the financial capacity to take that over,” Busler said. “They have excellent marketing and they do a lot of analytics … They could be successful with this.”

However, according to Caesars spokesman Gary Thompson, the company isn't planning to bid on Revel.

A Hard Rock spokesman declined to comment on the rumored interest and Penn Gaming did not immediately return a request for comment.

Busler said that for any potential buyer, risk is obviously a huge factor. But so might be the reward.

“Somebody may view this as an opportunity,” Busler said. “Here's a chance, everything's down right now. Any economist will tell you, 'Try to buy at the low and sell at the high.' We're in a down market. It won't be down forever.”

But the way state Sen. Raymond Lesniak (D-Union) sees it, the upcoming auction is not a time to get picky. He said he wants “anyone who's going to keep the lights on and keep as many people employed as possible.”

“What matters to me is that it stays open and operational,” Lesniak said.

E-mail to: andrewg@njbiz.comOn Twitter: @andrgeorge

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Andrew George

Andrew George covers the Statehouse from NJBIZ's Trenton bureau. Born and raised in N.J., Andrew has also spent time as a reporter in D.C., Texas and Pa. His email is andrewg@njbiz.com and he is @AndrGeorge on Twitter.

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